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Public sector bucks recession

Forget the crisis if you work for the state - 30,000 new jobs were created last year, and pay is rising ahead of inflation.

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Published: 19 Mar 2009

Last Updated: 31 Aug 2010

Overall unemployment may just have hit a 12 yr high of 2m, but jobs across the public sector are actually on the rise – 30,000 new positions were created last year according to the ONS. So while the private sector - and especially the financial industry – faces the pain of redundancies, pay freezes and even bankruptcy, many state-funded employees have never had it so good.

All this in a week in which the public sector has not exactly covered itself in glory, what with the high profile failings of Stafford Hospital and the news that nearly half of SATS tests taken by 14 yr olds are incorrectly graded.

Most of the growth in employment can be accounted for by a increase in NHS staffing of 21,000 late last year, but more the numbers of teachers and police are also on the rise. And while it’s hard to argue that more matrons and midwives can possibly be a bad thing, the ONS figures also record the fact that several thousand employees of Bradford & Bingley and Northern Rock are now on the taxpayer-funded payroll. Where they will shortly be joined by a fair number of recently-acquired colleagues from RBS. As if Sir Fred’s pension wasn’t bad news enough.

Meanwhile in the private sector, tens of thousands of jobs have been cut recently, with more to come. 220,000 jobs were lost last year in the finance and business services sectors alone – which includes bankers, lawyers and IT consultants. Nearly half of that total went in the last three months of the year. Elsewhere, reduced working hours, pay freezes and even pay cuts are becoming commonplace.

Of course it is part of the unwritten deal – the ‘psychological contract’ - for many who choose to work in the public sector that they enjoy greater job security and a decent pension at the cost of a smaller salary and less scope for individual advancement. Ask a public sector worker and the chances are that they will say that they are just enjoying one of the periodic advantages of their lot, and also that they have had to wait a pretty long time for their moment in the sun. And at least they can still afford to spend money to prop up flagging consumer demand.

But you don’t have to be a rocket scientist to work out that this is bad news for the economy in the long run. How can a shrinking private sector continue to support a growing public sector? The answer of course is that it can’t, and that the gap is being made up by even more government borrowing. Sooner or later this will have to be repaid, which means more taxes somewhere down the line.

Of course they wouldn’t need to borrow nearly so much if the public sector took a leaf or two out of the private sector book of recessionary management techniques. Like trying to improve their efficiency – boosting output without raising headcount – for a start. And going through all discretionary spending with a fine tooth comb. But that would mean that some fairly unpalatable decisions would have to be made, and with a general election only a year or so away to boot. All those nurses and teachers are voters, too, remember…